The Court of Appeals held in January of 2005 that "a rebuttable presumption of
market power arises from the possession of a patent over a tying product". The
Supreme Court concluded that "Congress, the antitrust enforcement agencies, and
most economists have all reached the conclusion that a patent does not necessarily confer
market power upon the patentee. Today, we reach the same conclusion, and therefore hold
that, in all cases involving a tying arrangement, the plaintiff must prove that the defendant
has market power in the tying product."

Background. Trident, Inc., a subsidiary of Illinois Tool Works, holds
U.S. Patent No.
5,343,226, which pertains to ink jet printer technology. Trident also makes ink.
Moreover, its standard form licensing agreement allowing the OEMs to use its
patented product requires the OEMs to purchase their ink for Trident systems
exclusively from Trident.

The Supreme Court summarized the arrangement. The petitioners, Trident and
Illinois Tool Works, "manufacture and market printing systems that include three
relevant components: (1) a patented piezoelectric impulse ink jet printhead; (2)
a patented ink container, consisting of a bottle and valved cap, which attaches
to the printhead; and (3) specially designed, but unpatented, ink. Petitioners
sell their systems to original equipment manufacturers (OEMs) who are licensed
to incorporate the printheads and containers into printers that are in turn sold
to companies for use in printing barcodes on cartons and packaging materials.
The OEMs agree that they will purchase their ink exclusively from petitioners,
and that neither they nor their customers will refill the patented containers
with ink of any kind."

Independent Ink also makes ink with the same chemical composition, and competes with
Trident.

Proceedings Below. Independent Ink filed a complaint in
U.S. District Court (CDCal) against Trident
and Illinois Tool Works. It sought a declaratory judgment of non-infringement and invalidity
against Trident's patents. It also alleged that Trident was engaged in illegal tying and
monopolization in violation of sections 1 and 2 of the Sherman Act, which are codified at
15 U.S.C. § 1 and
§ 2.

The District Court granted summary judgment in favor of Trident on both
claims. The District Court held that for patent tying to constitute a violation
of the antitrust laws, the plaintiff must affirmatively prove market power.

The U.S. Court of Appeals (FedCir)
issued its opinion [PDF] on
January 25, 2005, reversing the District Court. The Court of Appeals opinion is
also reported at 396 F.3d 1342.

It held that "a rebuttable presumption of market power arises from the
possession of a patent over a tying product". It further wrote that "Because no
rebuttal evidence was submitted by the patent holder, we reverse the grant of
summary judgment on the Sherman Act section 1 claim and remand for further
proceedings. As to Independent’s Sherman Act section 2 claim, we affirm the
district court’s grant of summary judgment."

Opinion of the Supreme Court. The Supreme Court noted that in 1988 the Congress
amended the Patent Act to eliminate the market power presumption in patent misuse cases.
Hence, it wrote that the "question presented to us today is whether the
presumption of market power in a patented product should survive as a matter of
antitrust law despite its demise in patent law". It concluded that "the mere
fact that a tying product is patented does not support such a presumption".

Much of the Supreme Court's opinion is a review of the over 100 year history
of the Courts' analysis of tying arrangements in the course of patent
infringement litigation. The Supreme Court noted that "Over the years, however,
this Court’s strong disapproval of tying arrangements has substantially
diminished. Rather than relying on assumptions, in its more recent opinions the
Court has required a showing of market power in the tying product."

The Supreme Court concluded that "tying arrangements involving patented
products should be evaluated under the standards applied in cases like
Fortner II and Jefferson Parish rather than under the per se rule
applied in Morton Salt and Loew’s. While some such arrangements
are still unlawful, such as those that are the product of a true monopoly or a
marketwide conspiracy, ... that conclusion must be supported by proof of power in the
relevant market rather than by a mere presumption thereof."

The Supreme Court also rejected Independent Ink's (respondent) argument
that there should be a rebuttable
presumption that patentees possess market power when they condition the purchase
of the patented product on an agreement to buy unpatented goods exclusively from
the patentee. Also, it rejected the argument that the Courts should
"differentiate between tying arrangements involving the simultaneous purchase of
two products that are arguably two components of a single product -- such as the
provision of surgical services and anesthesiology in the same operation, ... or
the licensing of one copyrighted film on condition that the licensee take a
package of several films in the same transaction, ... and a tying arrangement
involving the purchase of unpatented goods over a period of time, a so-called
``requirements tie.´´"

The Supreme Court reasoned that "Many tying arrangements, even those involving
patents and requirements ties, are fully consistent with a free, competitive market. For
this reason, we reject both respondent’s proposed rebuttable presumption and their narrower
alternative."

Finally, the Supreme Court vacated and remanded, rather than reversed. It explained
that Independent Ink (respondent) "reasonably relied on our prior opinions in moving
for summary judgment without offering evidence defining the relevant market or proving that
petitioners possess power within it. When the case returns to the District
Court, respondent should therefore be given a fair opportunity to develop and
introduce evidence on that issue, as well as any other issues that are relevant to its
remaining §1 claims. Accordingly, the judgment of the Court of Appeals is vacated, and
the case is remanded for further proceedings consistent with this opinion."

See also, Supreme Court
docket. This case is
Illinois Tool Work, Inc. v. Independent Ink, Inc., Sup. Ct. No. 04-1329, a petition
for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. No.
04-1196. The Court of Appeals heard an appeal from the U.S. District Court for the Central
District of California, Judge Cormac Carney presiding.

Justice John Paul Stevens wrote the unanimous opinion of the Supreme Court.
Justice Sam Alito, who just joined the Court, did not participate.

Illinois Tool Works was represented by
Andrew Pincus of the Washington DC office of the law firm of Mayer Brown
Rowe & Maw. Independent Ink was represented by
Edward O'Connor of the law firm of
O'Connor Christensen & McLaughlin, and
Kathleen Sullivan
of Stanford law school.

The Senate also approved an amendment (SA 2895) that provides that "At the
end of the bill add the following: This Act shall become effective 1 day after
enactment."

The Senate first held several roll call votes that terminated dilatory tactics employed
by just over a dozen opponents of the language contained in S 2271, and the conference
report on HR 3199.

The Senate approved a motion titled "Motion to Proceed to Consider the Motion to
Reconsider the Vote by which the Motion to Invoke Cloture on the Conference Report to Accompany
H.R. 3199 was Not Agreed To" by a vote of 86-13. See,
Roll Call No. 26.

The Senate approved a motion titled "Motion to Reconsider the Vote by Which Cloture
was Not Invoked on the Conference Report to Accompany H.R. 3199" by a vote of 85-14. See,
Roll Call No. 27.

And, the Senate approved a motion to invoke cloture, and terminate debate, on
the conference report on HR 3199 by a vote of 84-15. See,
Roll Call No. 28.

The Senate has yet to approve the
conference report
[PDF] on HR 3199,
the "USA PATRIOT Improvement and Reauthorization Act of 2005". It is scheduled to
resume consideration of this conference report on Thursday, March 2, 2006.

3/1. TLJ Daily E-Mail Alert No. 1,318, February 27, 2006, included a story on
the Library of Congress's (LOC)
Section 108 Study Group, and the LOC's
notice in the Federal Register requesting public comments, and announcing public
hearings. On March 1, 2006, Mary Rasenberger, Policy Advisor for Special Programs at the
U.S. Copyright
Office, wrote to TLJ that this story was "very misleading".

Rasenberger added that "Google's Print for Libraries program does not fall
under the current section 108 exceptions".

Google has pled Section 108 as an affirmative
defense to allegations of copyright infringement in pending litigation pertaining to its
Print for Libraries program. Google announced this program in a
release on
December 14, 2004. Both book publishers and the Authors' Guild filed lawsuits
late last year. See also,
story
titled "Google, Publishers and Authors Debate Google's Print for Libraries
Program" in TLJ
Daily E-Mail Alert No. 1,239, October 25, 2005.

The TLJ story in the February 27 issue stated, at paragraph 4, that
"17
U.S.C. § 108, titled ``Limitations on exclusive rights: Reproduction by
libraries and archives´´, provides exemptions from liability for infringement for
libraries and archives. Section 108 applies to ``libraries and archives´´ and
employees acting within the scope of their employment. Neither Section 108, nor
Section 101, the definitional section of the Copyright Act, define either
``library´´ or ``archive´´."

The TLJ story also stated, at paragraphs 20 through 24, as follows:

The LOC notice asks for comments on questions regarding whether the library
partners of Google should qualify for Section 108 immunity, and whether Google
itself should qualify.

For example, the LOC notice asks, "Should non-physical or ``virtual´´
libraries or archives be included within the ambit of section 108?"

The library partners of Google are not providing the digitization and
organization of their works. They are outsourcing this to Google. Although,
they will receive digital copies. Hence, the LOC notice asks, "How can the
issue of outsourcing be addressed? Should libraries and archives be permitted
to contract out any or all of the activities permitted under section 108? If
so, under what conditions?"

The notice also asks, "Should further definition of the terms ``libraries´´
and ``archives´´ (or other types of institutions) be included in section 108,
or additional criteria for eligibility be added to subsection 108(a)?" It also
asks "Are there other types of institutions that should be considered for
inclusion in section 108?"

It also asks, "Should eligible institutions be limited to nonprofit and
government entities for some or all of the provisions of section 108?"

The LOC's Rasenberger wrote in an e-mail response that the Section 108 Study Group
"is not addressing Google's activities."

She continued that "Google is not a library or archive for purposes
of Section 108, nor is it acting as an outsourcing agent in the case of Google
Print for Libraries, as you suggest in your article. Rather, Google is acting on
its own behalf, under agreement with libraries, yes, but NOT as an outsourcing
agent for the libraries. Indeed, Google's Print for Libraries program does not
fall under the current section 108 exceptions or any proposal currently on the
table in the Section 108 group."

She added that "the article does a disservice to the members of the group who
have been working extremely hard on the mission given them, as well as to the
public and members of Congress who are interested in the actual work of the
group -- that is, updating the copyright exceptions for libraries and archives
in light of digital media. Creating a false association with Google's activities
may arouse more interest in the work of the group, but will only cause confusion
on all sides -- to no one's benefit."

The LOC notice in the Federal Register identified Rasenberger and Chris Weston,
Attorney-Advisor, Copyright Office and Office of Strategic Initiatives of the LOC. See,
notice in the Federal Register, February 15, 2006, Vol. 71, No. 31, at Pages 7999-8002.

Prior to publication of the story, TLJ spoke with both Weston and Rasenberger. Weston
refused to answer questions regarding the relationship between the LOC's notice in the
Federal Register and Google Print for Libraries. Rasenberger promptly terminated the
conversation. Hence, the story related the language contained in the LOC's notice in the
Federal Register regarding the LOC's Section 108 Study Group, and not the LOC's attorneys'
understanding of the mission of the Section 108 Study Group.

Also, while Rasenberger wrote to TLJ that "Google's Print for Libraries
program does not fall under the current section 108 exceptions", this is an
as yet unresolved legal issue in pending litigation. The October 19, 2005,
complaint [35 pages in PDF] in McGraw Hill v. Google raises
the subject of Google's and libraries' Section 108 exemption in the context of Google
Print for Libraries.

The book publishers' complaint alleged that "Neither (a) the fair use
provisions of 17 U.S.C. § 107 nor (b) the narrow provisions of 17 U.S.C. § 108,
which in very different circumstances would allow a library but, in no event,
Google, to make digital copies of these works in a library's collection, excuse
Google's wholesale unauthorized copying." See, complaint, at page 4.

This case is
McGraw Hill Companies, Inc., Pearson Education, Inc., Penguin Group (USA)
Inc., Simon & Schuster, Inc. and John Wiley & Sons, Inc. v. Google Inc.,
U.S. District Court for the Southern District of New York, D.C. No. 05-CV-8881.

In contrast, Google has pled Section 108 as an affirmative defense. See, for
example, Google's November 30, 2005,
answer [10 pages in PDF] in Author's Guild v. Google, at page
7. Google asserted that "Google's use of and activities with respect to books
that are subject to copyright are subject to one or more of the limitations on
17 U.S.C. § 106 set forth in 17 U.S.C. §§ 107-122." This case is U.S.D.C.,
S.D.N.Y., D.C. No. 05 CV 8136 (JES).

Washington Tech CalendarNew items are highlighted in red.

Thursday, March 2

The House will meet at 10:00 AM for legislative business. It may
consider S 2271,
the "USA PATRIOT Act Additional Reauthorizing Amendments Act of 2006". See,
Republican Whip Notice.

The Senate will meet at 9:30 AM. It will resume consideration of the
conference
report [PDF] on
HR 3199,
the "USA PATRIOT Improvement and Reauthorization Act of 2005".

9:30 AM. The Senate Judiciary
Committee (SJC) may hold an executive business meeting. The agenda includes consideration
of several judicial nominations, including Jack Zouhary (to be a Judge of the U.S.
District Court for the Northern District of Ohio), Stephen Larson (USDC, Central
District of California), and Steven Bradbury (Assistant Attorney General in charge of
the Office of Legal Counsel). The agenda also includes
consideration of several bills, including
S 2178, the
"Consumer Telephone Records Protection Act of 2006",
S 1768,
a bill to permit the televising of Supreme Court proceedings, and
S 829,
the "Sunshine in the Courtroom Act of 2005". See,
notice. The SJC
rarely follows its published agenda. The SJC frequently cancels or postpones meetings
without notice. Press contact: Blain Rethmeier (Specter) at 202 224-5225, David
Carle (Leahy) at 202 224-4242 or Tracy Schmaler (Leahy) at 202 224-2154. Location: Room
226, Dirksen Building.

RESCHEDULED FROM MARCH 1. 10:00 AM. The
House Judiciary Committee (HJC) will meet to mark up numerous items, including
HR 4709,
the "Law Enforcement and Phone Privacy Protection Act of 2006" and
HR 2955, the
"Intellectual Property Jurisdiction Clarification Act of 2005". The
meeting will be webcast by the HJC. Press contact: Terry Shawn at 202 225.2492. Location:
Room 2141, Rayburn Building.

10:00 AM. The House
Appropriations Committee's Subcommittee on Labor, Health and Human Services, Education,
and Related Agencies will hold a hearing on the FY 2007 budget for President Bush's
American Competitiveness Agenda. Location: Room 2358, Rayburn Building.

9:00 AM. There will be an event titled "eBay
Media Roundtable". For more information, contact Jean Shim at 202
295-4114 or jshim at foley dot com. Location:
National Press Club, 529 14th St. NW, 13th Floor.

12:00 NOON. The Federal Communications
Bar Association's (FCBA) Wireless Committee will host a lunch. The
topic will be "Consumer Litigation in the Wireless Industry". The
speakers will be Laura Buckland (T-Mobile USA), Sue Haller (Sprint), and Michael
Altschul (CTIA). The price to attend is $15. Registrations and cancellations are
due by 12:00 NOON on February 28. See,
registration
form [PDF]. Location: Sidley Austin, 1500 K Street,
6th Floor.

9:30 AM. The U.S. Court of Appeals
(DCCir) will hear oral argument in AT&T (formerly SBC) v.
FCC, App. Ct. No. 05-1186. This is a petition for review of a final
order of the Federal Communications Commission
(FCC) denying a petition for forbearance from applying Title II regulatory
obligations to certain services characterized by SBC as internet protocol
services. See,
brief [40 pages in PDF] of the FCC. Judges Randolph, Tatel and Williams will preside.
Location: Prettyman Courthouse, 333 Constitution Ave., NW.

10:00 AM. The
Senate Banking Committee will hold a
hearing on reauthorization of the Export-Import Bank. The witnesses
will be James Lambright (acting President of the Ex-Im Bank), Gerald Rama (SVP
of PNC Bank), and Al Merritt (President of MD International). See,
notice. Location: Room __, Dirksen Building.

9:00 AM - 5:00 PM. The
Cato Institute and the Brookings Institution will
jointly host a one day event titled "The Marketplace of Democracy: A
Conference on Electoral Competition and American Politics". The agenda includes
a panel discussion from 10:30 - 11:45 AM that includes
Brad Smith, who is a
professor at Capital University Law School, a former member of the
Federal Election Commission (FEC), and an
opponent of FEC regulation of internet based speech. See,
notice, agenda and
registration page. Location: Cato, 1000 Massachusetts Ave., NW.

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information page.